JPMorgan has renewed its $146,000 long-term price target for bitcoin, which first made waves in January.
The bank says bitcoin is increasingly looking like a digital alternative to gold in the eyes of investors.
It said cryptos are "are an emerging asset class and thus on a multi-year structural uptrend."
JPMorgan recently published a deep dive into digital assets and it makes for happy reading for crypto fans - albeit with a few caveats.
The US's biggest bank has renewed its prediction that bitcoin could surge to $146,000 in the long term, if volatility subsides and institutions start preferring it to gold in their portfolios. That's roughly 130% above Wednesday's price of $63,160.
And JPMorgan thinks bitcoin, which is also a scarce product, is increasingly competing with gold for investors' attention as a hedge against inflation. (That is, something that will rise even as inflation eats away at the value of other assets.)
"The re-emergence of inflation concerns among investors during September/October 2021 appears to have renewed interest in the usage of bitcoin as an inflation hedge," JPMorgan strategist Nikolaos Panigirtzoglou said.
"Bitcoin's allure as an inflation hedge has perhaps been strengthened by the failure of gold to respond in recent weeks to heightened concerns over inflation," he said. Inflation is running at a 13-year high in the US and has surged around the world.
Panigirtzoglou said there is "little doubt" the token's competition with gold will continue, as millennials become more powerful in the investing universe, given their preference for cryptocurrencies.
"Considering how big the financial investment into gold is, any such crowding out of gold as an 'alternative' currency implies big upside for bitcoin over the long term," he said, suggesting a long-term price target of $146,000.
However, JPMorgan said that for the $146,000 price to come true, bitcoin's huge volatility would have to fall sharply, so that rules-bound investors feel comfortable adding it to their portfolios.
Bitcoin's volatility is currently around four to five times higher than gold, the bank said. That would have to fall dramatically before institutional investors plow in.
In a major caveat to its "theoretical" price target, JPMorgan said bitcoin's volatility is a big block to sustainable price rises. Its reputation among institutional investors took a blow during April and May's boom and bust, the bank said.
Indeed, JPMorgan reckons that volatility is such a problem that bitcoin's fair price is actually around $35,000 at the moment. Yet the bank said that the token's volatility is currently falling and that a price of $73,000 looks reasonable for next year.
However, bitcoin is wildly unpredictable. A surge above $146,000 looks entirely possible, given bitcoin's gain of more than 340% in the last year. But another plunge to below $30,000, as seen in the summer, is also a possibility, the bank said.
Either way, JPMorgan's global markets strategists appear bullish about crypto. "There is little doubt that cryptocurrencies and digital assets more broadly are an emerging asset class and thus on a multi-year structural uptrend," they said.
"Digital assets have emerged as a clear winner post the pandemic, with retail investors joining institutional investors such as family offices, hedge funds and real money asset managers including insurance companies in propagating the asset class."
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